Jill Kirby: THE HEALTH INSURANCE MARKET JUST GOT A LOT MORE INTERESTING

15 Jul 2012

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The arrival of GloHealth, the new private health insurance company last week should be just what the doctor/patient ordered.

The arrival of GloHealth, the new private health insurance company last week should be just what the doctor/patient ordered.

There are only three players right now providing private health cover to over two million people in a market that is worth €2 billion, compared to the 14 product providers in the €1.7 billion motor, home and travel insurance market.

The reason for this shortage of competition is because this is a mercilessly distorted insurance market dominated by the continuing existence of the entirely state-owned, unregulated and loss-making VHI.

Set up 50 years ago by the State, the VHI has been neither privatised or even turned into a commercial semi-state company and it has succeeded in extending the deadline for meeting capital and reserve requirements and for being properly regulated to December 2013.

There’s more: despite a huge fall in members - approximately 400,000 since it peak – and enormous losses, the VHI hasn’t restructured its huge staff numbers, its multiple offices around the country, its civil service pay rates and defined benefit pension benefits. For only but a few plans, it is the most expensive health insurer.

Perhaps all these issues will be addressed by its new chief executive John O’Dwyer, the hugely respected former MD of Friends First and former executive with both the VHI and Bupa Ireland (now LayaHealth).

But it is into this skewed playing pitch that GloHealth has decided to compete, but on terms that, ironically, are reminiscent of the original Bupa Ireland model when they came to Ireland in 1996 – simple, easy to understand core products at what appears to be very competitive prices.

It was Bupa’s innovation that not shook up the complacent monopolistic VHI, forcing it to cut its prices and bring in a better range of plans. Several years later, with the economy doing well, and a third company, Vivas (later bought out by Aviva) arrived, further shaking up the market.

In recent years, due both the economic downturn, higher costs for private beds in public hospitals and the imposition of a health levy on all members

(€285 per adult and €95 per child) to subsidise the loss-making VHI (which has a disproportionate number of older members) healthcare costs soared and the ‘switching’ war began.

Dozens of new plans were introduced for limited periods for the all-important family and corporate market especially. All of a sudden health insurance became hugely complicated and confusing. VHI in particular began penalising its older members with soaring premiums for the traditional Plan B-type plans that most of them purchased and began limiting benefits on those plans (like orthopaedic and optical treatments) and looking for co-payments.

The stoicism of Irish healthcare members in the face of soaring costs, weakening incomes, and the difficulty in comparing products (there are hundreds of plans now) is remarkable.

GloHealth is responding to this by simplifying the product range and appealing to new members – and younger ones – by give customers what they believe they need and can afford and dispensing with benefits they neither want now or may ever need later (like automatic maternity benefits if you happen to be male or a child and emergency international health care for families – these days – who can’t even afford a holiday at home.) These two non-core benefits are now optional and GloHealth customers can add them and six others to their three main plans which they cleverly have named ‘Good’, ‘Better’ and ‘Best’. They appear to be much cheaper than some popular Laya, Aviva and VHI plans, but the initial reaction of at least one health insurance expert expert is that GloHealth’s ‘perception’ of value is not the full story when more thorough price comparisons are done, though they commend the benefits/pricing structure of the ‘Best’ plan.

I think it is inevitable that GloHealth’s simple, easy to understand format will be very appealing. But price is the key and you will need to still to take the time to shop around before you consider switching (at renewal dates to avoid early switching penalties) or take out insurance for the first time.

Because there are hundreds of plans on the market I’ve asked for the expert opinion of three health insurance experts, Dermot Goode of HealthInsuranceSavings.ie Aengus Loughlin of TowersWatson health servicesand Roisin Lyons of Lyons Financial Services on GloHealth. I’ll bring them to you soon.

Having a good, affordable health insurance policy in a properly regulated market in this country is not a luxury, as two million people can attest.

The more insurers that compete for our business – and can provide affordable, alternative access to healthcare – is to be encouraged. Too bad the government doesn’t see it that way.

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